Question

Blossom Company bought a machine on January 1, 2017. The machine cost $140000 and had an expected salvage value of $24000. The life of the machine was estimated to be 5 years. The company uses the straight-line method of depreciation. The book value of the machine at the beginning of the third year would be

Answer 1

Answer

> Book Value at the beginning of third year = Original Cost - Accumulated Depreciation of 2 years.

>Working

A	Original cost	$140,000
B	Salvage value	$24,000
C = A - B	Depreciable base	$116,000
D	Life (in years)	5
E = C/D	Straight Line Depreciation annual	$23,200
	Depreciation expense:
	Year 1	$23,200
	Year 2	$23,200
F	Total Accumulated Depreciation for 2 years	$46,400
G = A - F	Book Value at the beginning of the third year	$93,600 = Answer

>Correct Answer = $ 93,600